Over the past one year, the $41-billion, or about Rs 2,67,000-crore, group has been handing several key roles with profit and loss (P&L) responsibility to young leaders, most of them under 35 years. Mumbai: Sun Pharma’s acquisition of 14 established prescription brands of Swiss drug maker Novartis in Japan will give it a head start in the $73 billion brand-conscious market but experts noted the company is likely to face challenges like periodic cuts in the prices of drugs that are part of the government’s reimbursement schemes.

Sun can offset the impact of downward revision of the prices if it populates its generic filings over the next few years, they said.

The $293 million acquisition puts Sun Pharma directly in the league of established generic drug makers in Japan like Sawai Pharmaceutical, Towa, Nichi-Iko, Teva and fellow Indian drug maker Lupin, currently ranked eighth in that market, constituting about 10% of its $2.2 billion global sales.

Sun, which logged sales of over $4.5 billion last year from worldwide sales, said the acquired brands in Japan have a combined annualized revenue of roughly $160 million. Industry sources familiar with the portfolio of Novartis drugs said those are categorized as “long listed products,” a term used for drugs that are in the government’s reimbursement list for several years.

An analyst in a foreign brokerage said sales of those products may have plateaued out as there may be generic substitutes. Sun said in its statement that Novartis will continue to distribute those brands, for a certain period, pending transfer of all marketing authorizations to Sun Pharma’s subsidiary. The acquired brands will be marketed by a reliable and established local marketing partner under the Sun Pharma label. The local marketing partner will also be responsible for distribution of the brands.

Experts closely tracking the Japanese pharmaceutical market said unlike in the US, which has a strong acceptance for pure generic drugs, Japan relies excessively on brands and is cautious in switching to generic drugs despite a strong push from the government.

“It’s a clever deal as the (Novartis) products have an established identity and will be eventually distributed by a strong local partner for Sun,” he said, asking not to be identified. Sun will gain access to a distribution network that mostly caters to global companies that market innovator, patented drugs. “This will help them overcome issues related to establishing its own presence and gaining recognition among the patients, physicians, distributors and chemists,” he added.

Like a few global players looking to shift focus from older generation, low margin drugs, industry sources said Novartis has also been planning to move away from its older brands. It was timed well for Sun Pharma.

However for most Indian drug makers, with the exception of Lupin, Japan has proved to be an elusive market despite its potential opportunities. Zydus Cadila exited the market in 2014 as experts believe it could not scale its operations, Torrent, which had formed a wholly owned subsidiary, exited in 2008, Orchid too exited the market in 2013. Dr. Reddy’s, which formed a joint venture with Fujifilm, also terminated its agreement in 2013 due to changes in their long term business strategies.

Sun Enters Land of the Rising Sun

Acquires 14 products in Japan from Novartis for $293 million

- Sun gets 14 established products

- String distribution network of Novartis

- Gets into the top list of generic companies like Sawai, Towa, Nichi-Iko, Teva and Lupin

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